Supply Chain News: Target Battling Out-of-Stock Issues, Following Years of the Same by Walmart

For almost five years, Walmart executives have been complaining about the company's struggles to keep its shelves well stocked with merchandise. Now Target admits it is having much the same problem in its US stores after problems with product availability helped kill its big entry into the Canadian market less than a year ago.

In October 2011, reports surfaced that Walmart had hired firms including Acosta Inc. in the US and Retail Insight in the UK to walk the aisles and track whether hundreds of items are in stock. Products were often missing from the store floor as a plan to add thousands of items back to stores after a major SKU pruning just two years before crowded storage space, while tighter labor budgets left workers less time to stock shelves.

The Target Canada stores never gained traction there and were losing large sums of money - with complaints about significant stock outs said to be a key issue in why Target stores never took off north of the border.

Then in early 2013, a report came that then Walmart US CEO Bill Simon had told a meeting of store managers that the retail giant's two-year problems with keeping store shelves stocked were "getting worse," and a major threat to its operations.

"We run out quickly and the new stuff doesn't come in," Simon said, according to the minutes of the meeting in February, as reported at the time by Bloomberg.

Then in March of 2014, more of the same, as again Bloomberg reported that Walmart executives told another meeting of store managers that if they could solve the out-of-stock issue it could lead to as much as $3 billion in additional sales in the US alone each year. Managers were told that Improving "in-stocks" was a top operational priority for the year.

So maybe there is something in the mass merchant air, as it was reported this week that Target was facing similar out-of-stock battles.

A web site called MPRNews.com, which covers news in the Minneapolis-St. Paul area where Target is headquartered, reported last week that while Target "once downplayed its problems keeping stores stocked with merchandise, Target CEO Brian Cornell now says the empty shelves are a serious problem that must be solved. Last month, he called the situation unacceptable and appointed veteran Target executive John Mulligan to find a fix."

That article was accompanies by a picture of an almost totally empty section of shelving said to be from a local Target store.

"We've been asking our supply chain to move well beyond its original design and become more flexible in the way we serve our guests," Mulligan told Wall Street analysts recently. "However, while we understand the reasons, the simple fact is that our current performance is unacceptable."

The challenge of running both additional logistics and fulfillment network while serving a rapidly growing on-line business at the same time is causing some of the inventory woes, Mulligan noted, "conceded the company's supply chain isn't built to serve customers in stores and online," MRPNews reported.

That in turn came just after news out of Walmart that it was changing the way it was managing inventory, with Greg Foran, current CEO of Walmart US, saying on the company's earnings call that the company has been holding more of its inventory at distribution centers rather than in the backrooms of its stores, a strategic choice that gives the retailer more flexibility in meeting demand - especially of the on-line variety.

Coming full circle, Foran added that keeping the inventory further upstream also has the additional benefit of freeing up extra space in store backrooms, enabling employees to operate more efficiently and find inventory there more easily. Walmart has also upgraded technology used by its managers and simplified the process of receiving deliveries and stocking shelves

Now back to Target. In May, it announced it was jumping on the RFID bandwagon, with Keri Jones, EVP global supply chain and operations, writing on a company blog that Target would start rolling out an item-level tagging program later this year.